Bank of New York sold a 4.919% stake in Wing Hang Bank yesterday (Tuesday) raising HK$731 million ($94 million) at a tight 4.5% discount to the stock's HK$53 spot close. The discount came in at almost half the level of recent placements, although the stock was down 2.7% on a day when the Hang Seng Index closed 0.2% up.
CLSA led the 14.45 million old share deal, which was marketed at a fixed price of HK$50.615. Books are said to have closed two-and-a-half times oversubscribed with participation by 50 accounts, of which 50% came from Asia and 25% each from Europe and the US.
As a result of the transaction, which represents 30 days trading volume, Bank of New York reduces its stake in Wing Hang from 25.123% to 20.204%. It last sold shares in the bank a decade ago and many investors are likely to view its current divestment as a cap on future share price performance. The bank has outperformed both the HSI and banking index over the past year, rising 121.47%.
However, as part of the lock-up agreement, Bank of New York is exempted if it wants to sell any or all of its remaining stake to a single buyer. This may prompt speculation that a stronger Wing Hang Bank is being readied for sale. In addition to Bank of New York, the Fung family holds a 20% stake and the rest is in freefloat.
Wing Hang purchased Chekiang First Bank in 2003 to become the seventh largest bank in Hong Kong, leapfrogging Dah Sing and ICBC (Asia). Management says it expects full revenue synergies to be reflected in 2004 and cost synergies in 2005.
CLSA research forecasts 16.8% upside from the placement price to a target price of HK$59.1. This is based on a 16 times 2004/5 P/E in line with the average of BEA (the next largest bank) and Dah Sing (the next smallest). It also predicts 20% EPS growth.
